Correlation Between American Airlines and Visa
Can any of the company-specific risk be diversified away by investing in both American Airlines and Visa at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Airlines and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Visa Inc, you can compare the effects of market volatilities on American Airlines and Visa and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Airlines with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Visa.
Diversification Opportunities for American Airlines and Visa
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Visa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and American Airlines is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Airlines Group are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of American Airlines i.e., American Airlines and Visa go up and down completely randomly.
Pair Corralation between American Airlines and Visa
Assuming the 90 days horizon American Airlines Group is expected to generate 5.29 times more return on investment than Visa. However, American Airlines is 5.29 times more volatile than Visa Inc. It trades about 0.23 of its potential returns per unit of risk. Visa Inc is currently generating about 0.13 per unit of risk. If you would invest 1,317 in American Airlines Group on September 15, 2024 and sell it today you would earn a total of 297.00 from holding American Airlines Group or generate 22.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Visa Inc
Performance |
| Timeline |
| American Airlines |
| Visa Inc |
American Airlines and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Visa
The main advantage of trading using opposite American Airlines and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Visa can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Visa will offset losses from the drop in Visa's long position.| American Airlines vs. RYANAIR HLDGS ADR | American Airlines vs. Ryanair Holdings plc | American Airlines vs. Superior Plus Corp | American Airlines vs. SIVERS SEMICONDUCTORS AB |
| Visa vs. American Airlines Group | Visa vs. GEELY AUTOMOBILE | Visa vs. LION ONE METALS | Visa vs. CarsalesCom |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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